• Simon Woods

COVID-19 (Coronavirus) – Insurance Implications

The following provides a brief overview of how some of the different classes of insurance (not all) are impacted by COVID-19 (Coronavirus) and how they might respond.



Travel insurance There are several types of travel insurance policies in the Australian market, and like many classes of insurance they vary considerably. There are two broad categories of travel insurance, and we cover each below.


Leisure Travel

These policies are designed to cover you for a particular trip. Some policies have a blanket exclusion for pandemics, others do provide coverage where the travel warning issued by the Australian government reaches a certain level e.g. 'Level 4 - Do not Travel'.


If you elect not to travel due to a fear of the consequences, but the Travel Warning has not reached Level 4, then your insurer is unlikely to provide coverage for any lost fares, accommodation, etc.


Another important point is since Coronavirus has become a listed disease by the Australian Government, any requests for leisure travel insurance since the end of January are likely to have a blanket exclusion for any losses arising from the disease.


Corporate Travel

Unlike leisure travel these policies are designed to cover all travel during the period of insurance.


Quality corporate travel insurance policies that were taken out or renewed before Coronavirus became a listed disease under the Biosecurity Act 2015, are likely to provide coverage for cancellation of trips to countries that are at Level 4 - Do Not Travel.

Again, a decision not to travel, where the travel warning level is not at the trigger level stated in your corporate travel policy, will not – under normal circumstances – activate the insurance coverage. Now that Coronavirus has reached the listed disease level, most insurers are placing a specific exclusion for losses occasioned by or happening through Coronavirus. This may be lifted once the disease is brought under control but only time will tell.


Each insurer has their own view as to when this date occurred and therefore extent of coverage available from that date varies. Most insurers will cover any travel that was booked prior to the end of January (conservatively) 2020 in accordance with normal policy terms and conditions.

Business Interruption

Traditionally, business interruption policies only cover disruption to a business as a result of damage to 'insured property'. However, over time, insurers widened the protection to provide coverage as a result of a closure of the business by a public authority for a number of risks, including infectious disease. This was designed to cover things such as an outbreak of Legionnaires disease, or measles; which can close down one or two buildings disrupting a small number of businesses. Notwithstanding this, some policies provide coverage for an outbreak up to 50 kilometres from the business location, but most only cover at or near the premises insured.

While there may be exceptions, where a specialist business has secured very specialist global insurance, the cover afforded by both business packs and standard Industry Special Risks policies, are not intended to cover disruption caused by an outbreak in a different state, let alone a different country.


The outbreak of the SARS (Severe Acute Respiratory Syndrome) in 2013, prompted insurers and reinsurers to do modelling as to just how large claims could amount to in the event of a major pandemic such as the Spanish Flu, which lasted from January 1918 – December 1920, and resulted in the death of anywhere between 40 and 100 million people.


The reality is that the global funds held by insurers could not meet business interruption claims arising from such a large-scale pandemic. We would have no insurance industry to protect against the traditional insured perils.


Not wishing to strip away the coverage that was being offered for localised infectious disease outbreaks insurers – prompted by reinsurers – added an exclusion to their policies, stating that disruption from a number of highly effective diseases were not covered. As such, diseases can arise at any time and originate from new sources, the insurance industry introduced a clause which excludes any disease that is notifiable under the Quarantine Act 1908 (Cth), which has been updated by many insurers in line with changes in legislation to the Biosecurity Act 2015 (Cth).


As of the end of January 2020, Coronavirus is a listed disease and so all, but a few, policies exclusions will take effect. This means that regrettably there is no insurance protection for disruptions to business arising from Coronavirus.


As with any other threat, it is important to consider what risk management measures you can introduce to mitigate the risk to your staff, customers and business.


Event Cancellation

Sports events, music festivals and industry conferences have all fallen victim to the virus, but most event cancellation policies contain a communicable diseases exclusion.


An extension can be written in, but now the outbreak is a 'know event' it is impossible to get cover specifically for Coronavirus. Specialist underwriting agency Sportscover has advised most customers didn't have the foresight to arrange such an extension.

Even if insureds arranged communicable disease coverage prior to the outbreak, insurers are unlikely to pay claims if an event cancellation is based on a decision by organisers, rather than a clear direction by authorities. The Federal Government's declaration on Friday that gatherings must be limited to 500 people could therefore have some implications.


Workers’ Compensation

In order for any worker to be eligible for compensation a disease must have been contracted in the course of employment and the employment must have been a significant contributing factor to the contraction of the disease.


In relation to Coronavirus where exposure can occur in public settings questions may arise as to the exact time and place of contracting the virus. As a result, it may be difficult to determine that employment was a significant contributing factor.


Each claim would need to be considered on its individual merits, having regard to the individual circumstances and evidence of each claim. Furthermore consideration should be given to a range of work related activities like travel to an area with a known viral outbreak, or interaction with people who have contracted the virus. In addition, and if directed to do so, an employee could make a claim for workers' compensation while working from home but they would need to be able to demonstrate clearly how the claim occurred and that it occurred in the course of their employment.


Personal Accident and Sickness Generally there are no exclusions under these policies for illness associated with pandemics such as Coronavirus. If you have any queries in relation to any of the above please contact your Woods Midland Insurance Broking Team on (08) 9460 0060.


Acknowledgments: - LMI Group Pty Ltd, “Coronavirus and Insurance” Papers,

- WorkCover WA

This document is provided as a matter of information only, for full insurance policy

terms and conditions please refer to your formal policy documentation. 18 March 2020

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